We develop and estimate a structural model that incorporates service intensity and endogenous contract choice into the standard labour supply framework. We apply our model to data collected on specialist physicians working in Quebec(Canada). These physicians are typically paid a fee-for-service (FFS) contract. Our panel data set covers a period of policy reform which allowed physicians either to remain on FFS or to adopt a mixed remuneration (MR) contract, under which they receive a per diem as well as a reduced FFS. We estimate the preference parameters of physicians governing the choice of contract and their hours worked and services provided. We use our estimates to simulate labour supply elasticities, to predict (ex ante) the effects of contracts on physician behaviour, and to evaluate selection effects. The supply of services is reduced under a MR contract, suggesting incentives matter. The hours spent seeing patients is less sensitive to incentives than the supply of services. Our results suggest that a reform forcing all physicians to adopt the MR system would have had substantially larger effects on physician behaviour than were measured under the observed reform.
Bernard Fortin : Département d’économique, Université Laval and CRREP, CIRANO and IZA.
Nicolas Jacquemet : Paris School of Economics and University Paris I Panthéon-Sorbonne.
Bruce Shearer : Département d’économique, Université Laval and CRREP, CIRANO and IZA.
The authors thank the Collège des médecins du Québec for making its survey data available and the Régie de l’assurance maladie du Québec and Marc-André Fournier for the construction of the database. This article was partly written while Fortin and Shearer were visiting the University Paris 1 Panthéon-Sorbonne. We thank participants at the Maurice Marchand Meeting in Health Economics (Lyon), the ADRES workshop on the Econometric Evaluation of Public Policies (Paris), the Canadian Economics Association (Montréal), the European Workshop on Econometrics and Health Economics (Thessalonique), the European Economic Association (Vienna) and the Econometric Society Winter Meeting (Chicago). We also thank seminar participants at CREST, the Free University of Amsterdam and Paris-Dauphine University. We are grateful to Michel Truchon as well as Bruno Crépon, Arnaud Dellis, Brigitte Dormont, Pierre-Yves Geoffard, Guy Laroque, Pierre-Thomas Léger, Pierre-Carl Michaud, and Marie-Claire Villeval for useful discussions and comments. We acknowledge research support from the Canadian Institute of Health Research (CIHR), le Fonds de recherche du Québec en société et culture (FRQSC), and the Canada Research Chair in Social Policies and Human Resources at the Université Laval.